Why More Startups Are Choosing To Operate Lean…Even If They Don’t Have To

Many young entrepreneurs have long held the belief that the solution to growing a business is to hire as many employees as they can, as quickly as possible. Recent data indicates that fast-growing companies are now hiring less people, even as their revenues are soaring.

Companies are choosing to operate lean, even when they can clearly afford to hire more people. This may appear counterintuitive at first glance. Isn’t it the philosophy of most entrepreneurs that creating businesses means creating new jobs? Well yes, but many business owners are finding that building up too fast can prove dangerous, and even fatal, to their startups.

The phrase, “slow and steady wins the race,” is rarely heard in boardroom meetings at fledgling companies. But perhaps, it should be. In fact, the more gradually a team grows, the better. Essentials should always come first. Entrepreneurs may find themselves interviewing some very talented people, early on in the process, before they have clearly defined their mission or objectives.

The temptation to take on new talent is great when excitement levels are high and aspirations are enormous, but it’s important to assess whether interviewees possess the skills that are needed in the beginning stages of building a business. The right people for the job in the early phases of growth are the ones who will focus on developing the product and getting the product in front of the people who need to see it.

The types of employees needed will expand as the company does. Once sales start to be made and the company has some stability, focus shifts towards talent retention and creating a scalable business model. It’s at that stage that experienced and upper-level team members come into play and not a moment before.

It’s true that managers are effective at juggling a variety of complex tasks, while leading a team of people – both of which are crucial to the success of a business. But people who have management experience generally want to continue doing it. It’s unproductive to utilize resources on growing a team before knowing whether a product or service is viable. When it does come time to scale, companies are continuing to hire with purpose.

If a company plans to hire only one software developer, they will expect that the developer can do the work of several less skilled technicians, in a fraction of the time. Fewer experts mean more effective operation and more sustainable growth. Since expectations and workload will be high, the developer will need to be paid enough to want to stay on board.

One highly skilled developer is more valuable than several junior developers combined. Still, every startup has unique views on what traits work together to form the perfect employee. Defining those traits early forms the foundation for a company’s culture. Hiring someone whose values don’t run parallel to those of the company, could spell trouble, no matter how talented they are. A difference in values could cause cracks in the infrastructure of the business. For these reasons, companies are willing to wait to find the right fit.

According to Inc.com, a company’s culture needs time to incubate; culture sets the tone with which people communicate with one another, how they choose to spend time together (in and out of the office) and how the company as a whole defines success. Culture is created by the people who join the team, not defined by the people who started the company. Rushing that process, at best, creates superficial and artificial values and at worst, a hostile or demoralizing work environment. The best people are drawn to startups not because of the potential pay or because of the product being sold, but for the opportunity to experience its culture. Conversely, the reputation of a negative culture, will keep talented people away.

Once a company has grown immensely successful, what prevents them from hiring on all the talented people they can get? Advances in technology has made the automation of more and more jobs possible. A new report conducted by the McKinsey Global Institute, concluded that up to 73 Million U.S. jobs will be completely eliminated by 2030 due to automation.

Robotics allows companies to reduce costs, which frees up more resources to invest in innovation. Any CEO will tell you that good people are hard to find. Brining in a machine means that they have to hire less people, which saves time, energy and resources. The business side of an organization knows that automation is key to higher growth potential and scalability. The humanitarian side of an organization loses sleep over how they employees they’ve fired will pay their bills. One compromise has been to begin to invest more heavily in their highly skilled staff, by training them to remain competitive against robots. This trend of operating lean is likely here to stay.

About Author:Eric Czerwonka is an entrepreneur and co-founder of Buddy Punch, an employee time tracking software company founded in 2013 that provides employee management solutions for any small and large companies alike – anyone with employees from startups right to corporations and anyone with a remote team to manage.

In the future, Eric hopes to continue to fit each problem with the correct solution through the use of technology as well as innovation. Eric also holds a Bachelor’s of Science from the University of Wisconsin-Madison.